* Bond yields rise after Fed's Powell stays away from action
* World shares on longest losing streak since September
* Oil prices jump as OPEC and allies hold off supply rise
* Dollar climbs, gold takes a bashing
By Marc Jones
LONDON, March 5 (Reuters) - It was a frantic Friday for
traders as another push higher in bond-market borrowing costs
and the dollar sank stocks, while oil prices jumped after OPEC
and its allies opted against increasing supply for the time
being.
Nervy European shares were trying to fight back .EU , but
Asia dropped overnight, Wall Street's S&P 500 briefly turned
negative for the year on Thursday .N and MSCI's all-country
index .MIWD00000PUS was on its longest losing streak in six
months.
The latest bout of volatility was sparked when Federal
Reserve Chairman Jerome Powell on Thurday showed little alarm
about the rise in yields while lively oil markets
and monthly U.S. jobs data due later meant another busy day was
in store.
"Markets were a little disappointed about what Chair Powell
said yesterday," said Henrietta Pacquement, head of investment-
grade fixed income at Wells Fargo Asset Management, referring to
hopes he would push back harder again rising yields.
If the U.S. data later comes in strong, it will add "fuel to
the fire" she said, although central banks like the Fed and the
European Central Bank, which is dealing with a more sluggish
euro zone economy, do have the ammunition to respond if yields
really start to rocket.
"Perhaps the U.S. is in the best position to take higher
rates, but it will be more difficult for Europe and also EM
(emerging markets)," Pacquement said.
Germany's benchmark 10-year bond yield edged up 2 basis
points to -0.29% DE10YT=RR , holding just below near one-year
highs hit last week as bond market pressures intensified.
Benchmark 10-year U.S. Treasury yields had risen 6 bps in
the half hour that Powell spoke overnight. They were hovering at
1.55% in Europe, just shy of Thursday's 1.56% closing level, the
highest end to a day since mid February last year.
Real yields, which take off the rate of inflation, rose 13
bps from their intra-day lows, while yield curves resumed their
steepening, with the gap between two-year and 10-year U.S.
yields at 142 bps, the widest since November 2015.
"The move in the (U.S.) 10-year was driven by real yields
(+9.5bps) as opposed to inflation expectations (-1.3bps) which
is not good for risk," Deutsche Bank's Jim Reid said.
PAYROLLS
S&P 500 futures ESc1 were higher, having turned around
overnight falls. The tech-heavy Nasdaq Composite .IXIC tumbled
2.1% on Thursday, leaving it down about 10% from its record
close on Feb. 12 and putting it in what is known in dealing
rooms as "correction" territory. .N
Even though Powell made it clear that the Fed was not close
to changing its ultra-loose monetary policy stance anytime soon,
analysts still worry rising Treasury yields could herald higher
borrowing costs, thereby limiting the fragile U.S. economic
recovery.
While Powell said the increase in yields was "notable and
caught my attention," he did not consider it a "disorderly"
move. Focus is turning to the release of February's U.S. non-farm
payrolls, with the market eyeing a 182,000 recovery in
employment growth and a steady unemployment rate of 6.3%.
"We suspect the market will be inclined to look through a
weaker number, with investors looking ahead to the big fiscal
stimulus planned in the U.S.," said Ray Attrill, head of forex
strategy at National Australia Bank.
Oil prices added to big gains after the Organization of
Petroleum Exporting Countries (OPEC) and its allies agreed to
mostly maintain their supply cuts in April as they await a more
solid recovery in demand from the COVID-19 pandemic. O/R
Brent crude futures for May LCOc1 rose as high as $68.62 a
barrel on Friday, a level not seen since Jan. 8, 2020. The
contract was last up $1.83, or 2.75%, and on track for a 3%
weekly gain and its 16th weekly rise in the last 18.
"OPEC+ has kept output steady, indicating that it wants to
take a cautious approach in normalising production," said
Ravindra Rao, vice president, commodities at Kotak Securities.
Rising Treasury yields also bolstered demand for the dollar.
The dollar index =USD jumped to a three-month high of 91.935,
knocking the Japanese yen JPY= to its lowest since June at
108.11 per dollar and tripping the euro EUR=EBS to $1.1930.
In emerging markets, Colombia's investment grade credit
rating looked at risk after the finance ministry jacked up its
deficit forecast and Moscow's markets were nervously eyeing
reports of Washington sanctioning Russia's government bonds.
The dollar's strength also hit gold prices, which sank to a
nine-month low as investors sold the precious metal to reduce
the opportunity cost of holding the non-yielding asset. GOL/
Spot gold XAU= was last at $1,697 per ounce, trading below
$1,700 for the first time since June 2020.
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Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
U.S. yields, inflation expectations and world stocks https://tmsnrt.rs/3biCx9l
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